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Investing in the UK Creative Industries | A New Way of Thinking

  • By Team

GBI Magazine speaks to the Directors of Great Point Media Dan Perkins, Jim Reeve and Kok-yee Yau at their Covent Garden office.

For years, the great and the good of the EIS investment community have viewed the media sector as the place to go for lower risk strategies – the place to invest to preserve capital.

Whether or not this view was accurate is now largely academic given recent rule changes and the removal of capital preservation strategies from the market; however, the business case for investing into the UK creative industries remains a strong one.

As a team of 24 media-focused professionals nestled in a quiet street behind London’s bustling Covent Garden, with decades of commercial and investment experience between us, the Great Point Group firmly believes now is the time to get behind our country’s media sector and support those entrepreneurs that will help maintain the UK’s position as a world leader in the creative industries.

Standing out from the crowd

To better understand the myriad of investment opportunities available, one must first consider the construct of the UK creative industries ecosystem and acknowledge that sat at the core of every valuable media business is intellectual property, be it a script, a new piece of technology, or rights to a book, piece of music, film or television show.

While the old Bill Gates adage ‘content is king’ has never been truer, with the investment case for content creation businesses being quite clear, the opportunities that lie in businesses providing production services and facilities (such as visual effects, for which the UK is renowned worldwide), content distribution and marketing services and future media (where technologies such as virtual reality are being used to create new consumer experiences or enhance existing ones), may be less obvious.

Exceptional performance will be achieved by led by experienced media entrepreneurs with proven track records of achievement. The key to identifying and unlocking this potential, for investors
and advisers alike, will therefore lie in choosing to work alongside a team of investment professionals with a deep-rooted network of industry relationships throughout the entire content creation value chain and a rigorous investment selection process.

It is for this reason that we have launched our latest EIS offering, Great Point Ventures EIS, which focuses purely on identifying exciting equity investment opportunities across the creative industries with the goal of supporting entrepreneurial management teams with unique talents and proven track records of achievement.

With change springs opportunity

We have previously commented in GBI Magazine that those cynics in our industry may have considered the implementation of the risk to capital conditions by HM Revenues & Customs (HMRC) in 2018 as the death knell for media-based investing in the UK.

This speculation has been fuelled further in recent weeks by the withdrawal of a leading media investor from the market citing issues surrounding the advance assurance process becoming trickier for businesses looking to operate in the creative industries since the new tests were introduced. As you might expect, this isn’t a view we share based on our experience of working with HMRC before and after the rule changes 12 months ago.

While it is true turnaround times are still not quite where anyone would like them to be, we have seen a number of advance assurances granted for genuine, growth-focused businesses operating in the content creation, distribution or tech-enabled new media sub-sectors.

As an experienced EIS manager, our view has always been that if the businesses you are looking to invest in are genuinely growth focused, with plans to recruit, and the ultimate aim of delivering value to UK Plc (born out by recent evidence of HMRC’s approach to media-focused businesses) then there should be no issues applying for, and receiving, advance assurance, irrespective of the sector you are operating in.

Deal flow and deployment: hitting the ground running

Launching a new fund is always a mixture of excitement and trepidation – excitement around the types of business whose growth plans you are looking to support, and trepidation as to whether the new offer will resonate with the intermediary and investor communities sufficiently for them to part with their hard-earned capital.

One of the key questions raised when discussing Great Point Ventures EIS by both intermediaries and investors is that of deal flow: how do you source it and how much of it do you have?

Our answer is a straightforward one. Since founding the business in 2013 we have always aimed to ensure the flow of potential investment opportunities outweighs the flow of inbound investor capital and as we are media specialists, our deal flow is sourced through our extensive network of industry contacts which often results in us having a first look at deals that other managers with a more generalist approach do not have access to.

At the time of writing this article we have already seen over £175 million of investment across more than 110 businesses which we have systematically whittled down to a select pool of companies. We aim to invest into a number of these companies in the next few weeks ensuring prompt deployment for advisers and investors that have supported us through our first couple of fundraising quarters.

A year-round opportunity

Rightly or wrongly, the focus at this time of year is always 5 April, whether it be a last-minute ISA or pension contribution, or someone desperately looking for an EIS investment that can allot immediately to enable a carry back of tax reliefs to the prior year.

The risk to capital conditions have helped shift this dynamic by ensuring that the investment case is the primary driving force behind deployment, rather than the timing of the tax break. As an investment-led business, we made a conscious decision to decouple the April quarterly close from the end of the tax year when designing Great Point Ventures EIS. Our desire is to have investors consider EIS investment opportunities throughout the year and, should the tax year in which relief is granted be a major part of an investor’s overall strategy, possibly encourage investment earlier in the tax year to ensure (as far as possible) those goals are met.

Who knows what the future holds?

2019 is already proving to be an interesting year in more ways than one, with no one truly being able to predict what the future may bring. That having been said, irrespective of market or political conditions, there will always be entrepreneurs with great ideas looking for capital to get them to that next level. It is the goal of Great Point Ventures EIS, with the help of our valuable investors and advisers, to ensure we keep that entrepreneurial engine running and drive the UK creative industries forward in uncertain times with a new way of thinking.

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